Ajanta Pharmaceuticals (AJAPHA) | 1211content.icicidirect.com/mailimages/IDirect_AjantaPharma_Q1FY18.pdf · Ajanta Pharma has five subsidiaries including one step down subsidiary

August 10, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

GST transition drags Q1 performance…

Revenues remained flat YoY at | 473 crore (I-direct estimate: | 486

crore). Domestic growth was impacted by GST transition while

export formulation growth was driven by robust growth in the US

EBITDA margins declined 802 bps YoY to 26.8% (I-direct estimate:

31%) mainly due to the impact of GST transition and higher fixed

overheads due to commissioning of new plants

Adjusted net profit declined 21% YoY to | 95 crore (I-direct

estimates: | 100 crore). Lower tax rate (20% against 24% in Q1FY17)

partly offset the lower operational performance)

Domestic formulations- Focus on new launches, few therapies

Domestic branded formulations constitute 31% of FY17 revenues. The

main distinguishing factor is the uncanny knack of launching maximum

number of first time launches with focus on new drug delivery system

(NDDS). Of the 200+ actively marketed brands, 70% brands were

introduced for the first time in India. The focus on specialty therapies and

niche product led APL to post strong growth at a CAGR of 22% in FY12-

17, far higher than industry growth of ~12%. Going ahead, we expect

domestic formulations to grow at a CAGR of 15% in FY17-19E to | 814

crore driven by a mix of existing products + new launches.

Exports traction manly from emerging markets; US segment shaping up

Export formulations constitute 66% of FY17 revenues. The company is

currently deriving export revenues from emerging markets such as Africa

(Franco Africa), Asia, LatAm and more recently from US. In emerging

markets, as opposed to the common practice of forging alliances with

regional pharmaceutical players, APL’s front-end marketing team interacts

directly with doctors. The US foray is also getting momentum. Currently,

US accounts for ~12% of sales. Overall export formulations have grown

at 24% CAGR in FY12-17 to | 1319 crore. We expect exports to grow at a

CAGR of 7% in FY17-19E to | 1499 crore driven by US launches.

One of the best matrixes among peers

With focus on niche therapies in domestic formulations and a calculated

approach in export market, APL remains an interesting candidate from the

midcap pharma space with high growth rates, strong margins,

commendable return ratios and lighter balance sheet. At this juncture, the

company is well poised to foray in the US market with its own sales team

in the foray. The company has filed 33 ANDAs and received 18 product

approvals. US sales are likely jump from a mere | 14 crore in FY16 to

| 315 crore by FY19 on the back of consistent launches on lower base.

Approval for Dahej facility is also likely to support growth.

GST impact on expected lines, exports get US booster; maintain BUY

GST transition impacted domestic branded formulations and, in turn,

overall financials. However, strong growth in the US drove exports sales,

which otherwise would have been impacted by lower anti-malarial tender

offtake in Africa. Despite a challenging environment in the US, the

management expects decent growth on the back of product launches in

the next 18-24 months. On the domestic front, the management expects

FY18 growth to be impacted due to GST transition but return to growth

trajectory in FY19. Despite capex intensity, the company remains on track

to generate similar kind of FCF, reflecting the core strength in earnings

besides healthy return ratios. We maintain BUY rating with a target price

of | 1420 based on 20x FY19E EPS of | 71.0.

Rating matrix

Rating : Buy

Target : | 1420

Target Period : 12-15 months

Potential Upside : 17%

What’s Changed?

Target Changed from | 1880 to | 1420

EPS FY18E Changed from | 61.7 to | 57.1

EPS FY19E Changed from | 72.4 to | 71

Rating Unchanged

Quarterly Performance

Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)

Revenue 473.1 475.9 -0.6 476.8 -0.8

EBITDA 127.5 166.0 -23.2 160.9 -20.8

EBITDA (%) 26.9 34.9 -793 bps 33.7 -680 bps

Adj. Net Profit 99.5 122.0 -18.4 114.0 -12.7

Key Financials

(|crore) FY16 FY17 FY18E FY19E

Revenues 1573.6 1822.7 2074.3 2393.8

EBITDA 522.6 636.0 628.0 780.8

Net Profit 422.0 499.8 504.8 626.9

EPS (|) 110.0 56.6 57.1 71.0

Valuation summary

FY16 FY17 FY18E FY19E

PE (x) 11.0 21.4 21.2 17.1

M.Cap/ Revenues (x) 6.8 5.9 5.2 4.5

EV to EBITDA (x) 20.4 16.5 16.6 13.1

Price to book (x) 4.1 7.1 5.6 4.4

RoNW (%) 37.3 33.2 26.5 26.0

RoCE (%) 46.2 41.8 33.1 32.4

Stock data

Particular

Market Capitalisation

Debt (FY17)

Cash (FY17)

EV

52 week H/L 2150/1151

Equity capital

Face value | 2

| 17.7 crore

| 10652 crore

Amount

| 10656 crore

| 6 crore

| 9 crore

Price performance (%)

1M 3M 6M 1Y

Ajanta Pharma -21.1 -24.1 -32.1 -33.6

Alembic Pharma 2.1 -12.1 -5.3 -16.9

Torrent Pharma -5.6 -8.0 -1.6 -16.0

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah

[email protected]

Harshal Mehta

[email protected]

Ajanta Pharmaceuticals (AJAPHA) | 1211

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis

Q1FY18 Q1FY18E Q1FY17 Q4FY17 YoY (%) QoQ (%) Comments

Revenue 473.1 485.9 475.9 476.8 -0.6 -0.8 GST impact in domestic market was largly offset by strong growth in the US

Raw Material Expenses 93.6 106.9 99.4 92.3 -5.8 1.5

Employee Expenses 86.7 77.7 70.3 75.5 23.3 14.8 YoY increased mainly due to commissioning of new plants

Other Expenditure 165.4 150.6 140.3 148.2 17.9 11.6 YoY increased mainly due to commissioning of new plants

Total Operating Expenditure 345.7 335.3 309.9 315.9 11.5 9.4

EBITDA 127.5 150.6 166.0 160.9 -23.2 -20.8 YoY increased mainly due to commissioning of new plants. Miss vis-a-vis I-direct

estimates was mainly due to higher-than-expected employee cost and other

expenditure

EBITDA (%) 26.9 31.0 34.9 33.7 -793 bps -680 bps

Interest 0.1 0.9 1.0 0.4 -93.1 -82.1

Depreciation 13.4 20.6 13.0 18.9 3.2 -29.1 YoY increased mainly due to commissioning of new plants

Other income 4.8 2.4 5.5 2.4 -12.8 99.2

PBT before EO 118.7 131.6 160.5 144.0 -26.0 -17.5

Less: Exceptional Items 0.0 0.0 0.0 0.0 0.0 0.0

PBT 118.7 131.6 160.5 144.0 -26.0 -17.5

Tax 23.9 32.0 38.5 30.0 -37.8 -20.1

MI & Share of loss/ (gain) asso. 0.0 0.0 0.0 0.0 0.0 0.0

Adj. Net Profit 99.5 99.5 122.0 114.0 -18.4 -12.7 Delta vis-à-vis EBITDA growth was largely due to lower taxation

Key Metrics

Domestic 143.0 137.7 162.0 140.0 -11.7 2.1 YoY growth adversely impacted due to de-stocking by the distribution channel on

account of GST

Exports 320.0 331.7 297.0 316.0 7.7 1.3 US sales increased to | 54 crore against | 10 crore in Q1FY17. Asia business grew

4% YoY to | 96 crore while African business declined 13% YoY to | 168 crore.

Source: Company, ICICIdirect.com Research

Change in estimates

(| Crore) Old New % Change Old New % Change

Revenue 2,173.4 2,074.3 -4.6 2,453.6 2,393.8 -2.4

EBITDA 749.8 628.0 -16.2 871.0 780.8 -10.4

EBITDA Margin (%) 34.5 30.3 -422 bps 35.5 32.6 -288 bps Trimmed mainly due to increase in fixed cost owing to commissioning of new plants

and GST impact in Q1FY18

PAT 545.4 504.8 -7.4 639.3 626.9 -1.9 Delta vis-à-vis EBITDA was due to reduce in tax rate and increase in other income

EPS (|) 61.7 57.1 -7.4 72.4 71.0 -2.0

FY18E FY19E


Assumptions

`

(| crore) FY16 FY17 FY18E FY19E FY18E FY19E

Branded - domestic 503.7 593.0 639.7 791.3 686.5 795.0 Changed mainly due to GST impact in Q1FY18

Exports Total 1,176.8 1,319.0 1,341.8 1,498.9 1,395.3 1,557.4

Current Earlier



Company Analysis

Established in 1973, APL is mainly into exports as well as domestic

formulations. As of FY17 the exports: domestic formulation ratio was at

68:32. The company owns five manufacturing facilities- four in

Aurangabad, Maharashtra and one in Mauritius. Of these five facilities,

only one in Aurangabad in an API facility, rest all are formulations.

Consolidated revenues, EBITDA and PAT have grown at a CAGR of 24%,

37% and 51%, respectively, in FY12-17. APL had come out with a maiden

IPO in March 2000. It raised | 68 crore which was earmarked for capacity

expansion and debt repayment.

Domestic formulations constitute 31% of the total consolidated turnover

(FY17). This segment has been further segregated into two sub-

segments- 1) Branded formulations and 2) Institutional business. Initially

the company was catering to institutional business. Institutional sub-

segment accounts for ~7% of the domestic formulations and mainly

confined to government and institutional tenders. It is only in the last 10

years that the focus was shifted to branded formulations business, which

now accounts for ~93% of the domestic formulations.

The company focuses on only few so called specialty therapies –

ophthalmology, dermatology and cardiology. Together, these therapies

constitute ~89% of domestic branded formulations. The company

invested heavily in the technology and field force especially in the first

five years after the changed focus. The focus was also to offer novel

delivery system. From | 17 crore in FY05, the branded formulations have

grown at a CAGR of 28% to | 593 crore in FY17. Till date the company

has launched ~200+ products out of which 70% are first time launches.

The current MR strength is ~3000+. Overall, domestic formulations have

grown at a CAGR of 22% in FY12-17 to | 614 crore. The company has

only one product under the National List of Essential Medicines (NLEM)

2011 list.

Export formulations constitute 66% of total consolidated turnover (FY17).

Exports are mainly confined to emerging markets and constitute branded

generics. APL exports its products in ~31 emerging markets with

significant presence in Franco African countries and Philippines.

Africa accounts for ~54% of export formulations followed by Asia. The

company also participates in anti-malarial tenders in Africa. It operates

through 710+ MRs in these emerging markets and owns a portfolio of

1550 registered brands in these markets encompassing major therapies

such as anti-infectives, anti-malarials, ophthalmic, dermatology,

cardiovascular, GI etc. The company also has a marginal presence in Latin

America. It has also forayed into regulated markets such as US where it

has filed 33 ANDAs and received approvals for 18. Overall export

formulations have grown at a CAGR of 24% in FY12-17 to | 1557 crore.

Ajanta Pharma has five subsidiaries including one step down subsidiary

located in Mauritius, Philippines and the US. The Mauritius subsidiary

with an independent manufacturing base mainly caters to the Franco

African markets. The subsidiary in Philippines, which is a marketing arm,

caters to the Philippines market. The US subsidiary is an administrative

office to facilitate US operations.


We expect revenues to grow at a CAGR of 11% to | 2454 crore in FY17-

19E, on the back of strong growth in both exports and domestic

formulation segments. Exports are likely to grow at a CAGR of 9% to

| 1557 crore during the same period to be driven by growth in the legacy

export markets of Africa and Asia and commencement of US shipments.

Similarly, the domestic formulations segment is likely to register a CAGR

of 15% to | 814 crore in the same period, to be driven by branded

formulations.

Exhibit 1: Revenues growth trend

677.4

930.8

1208.3

1480.61573.6

1822.7

2074.3

2393.8

0

500

1000

1500

2000

2500

3000

FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

(|

crore)

Revenues


Domestic formulations- APL operates in branded (prescription: Rx, 93.4%

of domestic sales) and tender business (6.6% of domestic sales). In the

branded space, it has presence in fast growing specialty therapies viz.

ophthalmology, dermatology, chronic therapies such as cardiovascular

(CVS). In the acute space, it has a marginal presence in pain management

and gastrointestinal. APL currently markets ~200+ brands through 3000+

medical representatives (MRs) covering 3 lakh doctors.

Over the years, the company has developed a knack of launching

maximum number of first launches with focus on new drug delivery

system (NDDS). It was one of the very few companies to launch products

such as Metoprolol (CVS), Rosuvastatin + Clopidogrel (CVS),

Hydroquinone + Mometasone + Tretinoin (Derma), etc, in the Indian

market. The company’s first differentiated (NDDS) product Nimesulide

(pain) daily once was launched under the brand name of Nimlodi in FY02.

Out of 200+ actively marketed brands, 70% brands were first launches in

India. The focus on specialty therapies and niche product led APL to post

a strong CAGR of 22% in FY12-17, which is far higher than the industry

growth of ~12% (AIOCD data).

As per the latest AIOCD data, APL ranks No. 33 in the Indian

pharmaceutical market with market share 0.62%. Approximately 12% of

total domestic sales are under NLEM. They are mainly from CVS

category.

The company markets CVS, ophthalmology and dermatology products

under the divisions of Anvaxx, Illuma and Ansca. The company launches

~20 new products every year including line extensions. We expect the

company to continue with 12-15 product launches every year. Overall we

expect domestic formulation sales to grow at a CAGR of 15% to | 814

crore in FY17-19E.

27.9% CAGR

11% CAGR


Exhibit 2: Domestic formulation growth likely to be at a CAGR of 15% in FY17-19E

227.0

292.0

385.0

479.0

538.7

614.0

662.4

814.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0


Total Domestic


Formulation Exports

Exports account for 66% of the revenues. APL currently derives almost its

entire export revenues from emerging regions like Africa (Franco Africa),

Asia and the LatAm having a presence in more than 31 countries. Exports

have grown at 24% CAGR in FY12-17.

The company markets its products through a team of 710+ MRs. At

present, the company is marketing 1550+ products in these regions.

APL’s success story in emerging markets was carved out of the so called

differentiated approach. According to this, products were developed on

the basis of unmet medical needs in a particular geography. As a result,

the product basket varied from nation to nation. Similarly, the company

resorted to a different strategy of product marketing. As opposed to the

common practice of forging alliances with local/regional pharmaceutical

players, APL’s front-end marketing team interacts directly with doctors.

The company has consistently introduced new products in these markets.

Overall, we expect export sales to grow at a CAGR of 7% to | 1499 crore

in FY17-19E.

Exhibit 3: Exports to grow at CAGR of 7% in FY17-19E

445.0

629.0

793.0

978.1

1176.8

1319.0 1341.8

1498.9

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0


Total Exports


24.1% CAGR

15.1% CAGR


Exhibit 4: Derma sales(dom) to grow at CAGR of 15% in FY17-19E

62.0

79.0

100.0

116.7123.0

142.0147.8

187.5

0.0

200.0


Dermatology


Exhibit 5: Cardio sales(dom) to grow at CAGR of 15% in FY17-19E

49.0

72.0

104.0

149.7

203.0

252.0

273.9

333.0

0.0

200.0

400.0


Cardiology

Source: Company, ICICIdirect.com, Research

Exhibit 6: Ophthalmic sales (domestic) at CAGR 15% in FY17-19E

46.064.0

85.0

115.3135.0

154.0167.8

203.5

0.0

200.0

400.0


Ophthalmology


Exhibit 7: Institutional domestic business

53.0 54.066.0 61.4

35.0

21.0 22.7 22.7

0.0

200.0


Institutions- domestic


Exhibit 8: Africa sales exports growth at CAGR -1% in FY17-19E

256.0

340.0

440.0

527.3

682.4712.0

647.8

695.3

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0


Africa


Exhibit 9: Asia exports growth at CAGR 7% in FY17-19E

179.0

263.0

337.0

439.4469.5

418.0437.3

481.0

0.0

200.0

400.0

600.0


Asia



Exhibit 10: EBITDA to grow at CAGR of 10.8% in FY17-19E

140.7

221.6

368.8

505.2522.6

636.0 628.0

780.8

20.8

23.8

30.5

34.133.2

34.9

30.3

32.6

0

100

200

300

400

500

600

700

800

900


(|

crore)

0

4

8

12

16

20

24

28

32

36

40

(%

)

EBITDA EBITDA Margins (%)


Exhibit 11: Net profit to grow at CAGR of 9.4% in FY17-19E

50.7

77.3

112.1

233.9

309.9

422.0

499.8 504.8

11.412.0

19.4

20.9

26.827.4

24.3

26.2

0

100

200

300

400

500

600


(|

crore)

0

4

8

12

16

20

24

28

32

(%

)

Net Profit Net Profit Margins (%)


Exhibit 12: Trends in return ratios

17.3

22.0

35.8

45.1

50.9

46.2

41.8

33.1

22.2

25.9

28.5

39.437.7 37.3

33.2

26.5

10

18

26

34

42

50

58


(%

)

RoCE (%) RoNW (%)



Exhibit 13: Trends in quarterly financials

(| crore) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 YoY (%)

Net Sales 385.7 434.5 469.6 419.2 454.2 502.4 515.0 456.1 463.0 10.4

Other Operating Income 5.7 3.2 7.1 6.5 16.8 13.4 18.1 20.7 16.2 148.2

Total Operating Income 391.4 437.7 476.6 425.7 471.0 515.8 533.1 476.8 479.2 12.6

Raw Material Expenses 103.4 99.5 115.5 95.5 99.4 116.6 106.4 92.3 93.6 -1.9

% of Revenue 26.4 22.7 24.2 22.4 21.1 22.6 20.0 19.3 19.5 -289 bps

Gross Profit 288.0 338.2 361.2 330.3 371.7 399.3 426.7 384.6 385.6 16.8

Gross Profit Margin (%) 73.6 77.3 75.8 77.6 78.9 77.4 80.0 80.7 80.5 289 bps

Employee Expenses 59.2 63.8 64.8 69.0 70.3 72.2 77.4 75.5 86.7 25.7

% of Revenue 15.1 14.6 13.6 16.2 14.9 14.0 14.5 15.8 18.1 189 bps

Other Expenditure 106.2 120.5 132.5 120.7 140.3 144.1 171.3 148.2 165.4 37.0

% of Revenue 27.1 27.5 27.8 28.3 29.8 27.9 32.1 31.1 34.5 616 bps

Total Expenditure 268.8 283.8 312.8 285.1 309.9 332.8 355.1 315.9 345.7 21.2

% of Revenue 68.7 64.9 65.6 67.0 65.8 64.5 66.6 66.3 72.1 516 bps

EBITDA 122.5 153.8 163.9 140.6 161.1 183.1 178.0 160.9 133.5 -5.0

EBITDA Margin (%) 31.3 35.1 34.4 33.0 34.2 35.5 33.4 33.7 27.9 -516 bps

Other Income 8.0 5.4 2.3 2.6 5.5 6.7 19.2 2.4 4.8 82.4

Interest 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 0.0

Depreciation 10.3 11.0 11.7 12.1 13.0 14.0 15.3 18.9 13.4 11.4

PBT (bef Excep's) 119.1 147.2 153.4 130.1 152.5 174.7 180.8 143.3 123.8 -4.8

Less: Exceptional Items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

PBT 119.1 147.2 153.4 130.1 152.5 174.7 180.8 143.3 123.8 -4.8

Total Tax 33.0 47.2 38.7 24.9 38.5 34.5 38.5 30.0 23.9 -3.9

Tax rate (%) 27.7 32.1 25.2 19.1 25.2 19.7 21.3 20.9 19.3 19 bps

PAT 89.6 100.0 114.3 107.5 122.0 140.5 142.6 114.0 94.8 -11.8

PAT Margin (%) 22.9 22.8 24.0 25.3 25.9 27.2 26.7 23.9 19.8 -547 bps


SWOT Analysis

Strengths- Industry beating growth on a consistent basis, Focused

approach in the exports space, high return ratios, knack of launching new

products on a consistent basis.

Weakness- High Product concentration.

Opportunities- The US Generics space.

Industry specific threats- Increased USFDA scrutiny across the globe

regarding cGMP issues, pricing pressure due to client consolidation in the

US. Increased competition in the domestic formulations space


Conference call Highlights

India MR strength was at 3000+

Cumulative ANDAs status was at 15 pending ANDAs with two

under tentative approval. The approved ANDAs were at 18. In

FY18, the company expects to file 12-15 ANDAs

The capex for FY17 was at | 300 crore. Q1FY18 capex was in the

vicinity of | 65-70 crore

Africa business included | 95 crore from anti-malarial tenders for

Q1FY18 as against | 120 crore in Q1FY17

Overall African anti-malaria tender size has reduced. Hence, the

company expects the African tender business to decline by 15-

20% in FY18. Ex-tender business African business grew 5-7% in

constant currency.

Asian business grew 10% in constant currency. The company has

guided for 10-12% constant currency growth for FY18

The company expects 30% margins in FY18. For FY 19 the

company expects 100-200 bps YoY improvement in EBITDA

margins

The company has guided for 22% and 21% tax rate for FY18 and

19 respectively. Beyond FY19 the company expects MAT tax rate.

Asian revenues of | 85 crore comprise of South East Asia (40-

45%), MENA (45%) and Central Asia (10-15%)

Sequential growth in US was mainly due to higher off tack in

gAbilify (CNS) sales

Cash was at | 225 crore as of end of Q1FY18

Exhibit 14: Brand Introduction in Export markets

Region Brands Registered Major Segments

Africa 1310 Anti Malaria, Multivitamin, Cardio, Antibiotic, Gynaec, MED, Pain

Asia 349 Cardio, Pain, MED, GI, Antibiotic, Derma, Anti Histamine


Exhibit 15: Facilities

Location Segment Regulatory Approvals Type

Paithan, India (3

Aurangabad facilities)

Formulations US FDA, UK MHRA, health authorities

of Brazil and Colombia, WHO pre-

qualification

tablets, capsules,

ointments, injections and

dry powder

Mauritius Formulations

Dahej (upcoming) Formulations

Guwahati (upcoming) Formulations

Aurangabad API WHO


US FDA


Valuation

GST transition impacted domestic branded formulations and, in turn,

overall financials. However, strong growth in the US drove exports sales,

which otherwise would have been impacted by lower anti-malarial tender

offtake in Africa. Despite a challenging environment in the US, the

management expects decent growth on the back of product launches in

the next 18-24 months. On the domestic front, the management expects

FY18 growth to be impacted due to GST transition but return to growth

trajectory in FY19. Despite capex intensity, the company remains on track

to generate similar kind of FCF, reflecting the core strength in earnings

besides healthy return ratios. We maintain BUY rating with a target price

of | 1420 based on 20x FY19E EPS of | 71.0.

Exhibit 16: One year forward PE [

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.08/10/2011

2/10/2012

8/10/2012

2/10/2013

8/10/2013

2/10/2014

8/10/2014

2/10/2015

8/10/2015

2/10/2016

8/10/2016

2/10/2017

8/10/2017

(|)

Price 54.0x 42.9x 31.7x 20.6x


Exhibit 17: One year forward PE of company vs. CNX Pharma Index

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

8/10/2011

2/10/2012

8/10/2012

2/10/2013

8/10/2013

2/10/2014

8/10/2014

2/10/2015

8/10/2015

2/10/2016

8/10/2016

2/10/2017

8/10/2017

Ajanta CNX Pharma

Premium 10%


Exhibit 18: Valuation

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)

FY16 1574 6.3 110.0 36.2 11.1 20.6 37.3 46.2

FY17 1823 15.8 56.6 18.5 21.7 16.7 33.2 41.8

FY18E 2074 13.8 57.1 1.0 21.4 16.8 26.5 33.1

FY19E 2394 15.4 71.0 24.2 17.3 13.2 26.0 32.4



Recommendation history vs. Consensus

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

0

500

1,000

1,500

2,000

2,500

Jul-17May-17Feb-17Dec-16Oct-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, Company, ICICIdirect.com Research; Initiated on September 22, 2014

Key events

Date Event

Jun-08 Commissions dedicated R&D facility in Kandivali, Mumbai

Mar-09 Enters the Philippines market via incorporation of a subsidiary

Mar-09 USFDA approves Paithan faciliy

Mar-10 Acquires formulation facility near Aurangabad to cater to ROW markets

Dec-12 Enters regulated markets with first product approval in the US and one for Europe.

Mar-13 Launches first product in the US

Jan-15 Board approves subdivision of sharesfrom | 5 to | 2

Mar-16 Aurangabad facility receives EIR with no observations

Mar-16 Dahej facility receives one USFDA 483 observation

Apr-17 Dahej facility was cleared by USFDA without any form 483 observations


Top 10 Shareholders Shareholding Pattern

Rank Investor Name Latest Filing Date % O/S Position Position Change

1 Agrawal (Ayush Madhusudan) 11-Jul 14.6 12.9m 0.0m

2 Agrawal (Rajesh) 11-Jul 14.6 12.8m 0.0m

3 Agrawal (Yogesh Mannalal) 11-Jul 14.6 12.8m 0.0m

4 Agrawal (Ravi P) 11-Jul 14.6 12.8m 0.0m

5 Gabs Investments Pvt. Ltd. 11-Jul 9.5 8.4m 0.0m

6 Matthews International Capital Management, L.L.C. 11-Jul 2.8 2.5m 0.0m

7 Ganga Exports 11-Jul 2.8 2.4m -2.7m

8 Motilal Oswal Asset Management Company Ltd. 30-Jun 1.6 1.4m 0.0m

9 SBI Funds Management Pvt. Ltd. 11-Jul 1.5 1.4m 1.3m

10 Kotak Mahindra Asset Management Company Ltd. 11-Jul 1.1 1.0m 0.0m

(in %) Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Promoter 73.8 73.8 73.8 73.8 73.8

Others 26.2 26.2 26.2 26.2 26.2

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value ($) Shares Investor name Value ($) Shares

SBI Funds Management Pvt. Ltd. 27.4m 1.3m Agrawal (Purushottam B) -73.4m -2.7m

Pictet Asset Management Ltd. 6.0m 0.2m Agrawal (Madhusudan B) -73.4m -2.7m

Fundsmith LLP 3.6m 0.1m Agrawal (Mannalal B) -73.4m -2.7m

Matthews International Capital Management, L.L.C. 1.0m 0.0m Ganga Exports -58.8m -2.7m

William Blair & Company, L.L.C. 0.7m 0.0m Grandeur Peak Global Advisors, LLC -2.4m -0.1m

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary

Profit and loss statement | crore

(Year-end March)/ (| crore) FY16 FY17 FY18E FY19E

Total Operating Income 1,573.6 1,822.7 2,074.3 2,393.8

Growth (%) 6.3 15.8 13.8 15.4

Raw Material Expenses 414.0 439.8 492.4 583.7

Gross Profit 1,159.6 1,382.9 1,581.9 1,810.1

Gross Profit Margins (%) 73.7 75.9 76.3 75.6

Employee Expenses 235.0 269.8 294.0 311.2

Other Expenditure 402.0 477.1 659.8 718.1

Total Operating Expenditure 1,051.0 1,186.7 1,446.3 1,613.0

EBITDA 522.6 636.0 628.0 780.8

Growth (%) 3.4 21.7 -1.3 24.3

Interest 4.2 2.8 0.3 0.3

Depreciation 42.7 59.5 53.7 66.1

Other Income 86.9 67.0 68.6 79.1

PBT before Exceptional Items 562.6 640.7 642.6 793.5

Less: Exceptional Items 0.0 0.0 0.0 0.0

PBT after Exceptional Items 562.6 640.7 642.6 793.5

Total Tax 140.6 140.8 137.9 166.6

PAT before MI 422.0 499.8 504.8 626.9

PAT 422.0 499.8 504.8 626.9

Growth (%) 36.2 18.5 1.0 24.2

EPS (Adjusted) 110.0 56.6 57.1 71.0


Cash flow statement | crore


Profit/(Loss) after taxation 422.0 499.8 504.8 626.9

Add: Depreciation & Amortization 42.7 59.5 53.7 66.1

Net Increase in Current Assets -207.9 -48.9 -74.9 -92.1

Net Increase in Current Liabilities 33.2 -3.4 20.7 25.4

Others 4.2 2.8 0.3 0.3

CF from Operating activities 294.1 509.8 504.5 626.6

Long term Loans & Advances 0.0 0.0 0.0 0.0

Investments -11.7 -104.8 -100.0 -200.0

(Purchase)/Sale of Fixed Assets -237.9 -279.5 -300.0 -300.0

Others 110.2 34.7 0.2 0.2

CF from Investing activities -139.4 -349.7 -399.8 -499.8

(inc)/Dec in Loan 10.0 -61.7 0.0 0.0

Dividend & Dividend tax -134.2 -128.7 -100.8 -125.1

Other -3.5 -3.0 -0.3 -0.3

CF from Financing activities -127.7 -193.4 -101.1 -125.4

Net Cash Flow 27.1 -33.3 3.6 1.3

Cash and Cash Equivalent at the beginning 10.6 37.6 8.9 12.6

Cash 37.6 4.4 12.6 13.9

Free Cash Flow 56.2 230.3 204.5 326.6


Balance sheet | crore


Equity Capital 17.7 17.7 17.7 17.7

Reserve and Surplus 1,114.0 1,486.3 1,890.3 2,392.0

Total Shareholders funds 1,131.7 1,503.9 1,907.9 2,409.7

Total Debt 67.2 5.5 5.5 5.5

Deferred Tax Liability 23.6 27.4 27.9 28.5

Long-Term Provisions 2.6 3.2 3.2 3.3

Other Non Current Liabilities 0.5 0.1 0.1 0.1

Source of Funds 1,225.5 1,540.1 1,944.7 2,447.1

Gross Block - Fixed Assets 679.2 859.3 1,084.3 1,309.3

Accumulated Depreciation 246.4 286.4 340.0 406.1

Net Block 432.8 572.9 744.3 903.1

Capital WIP 239.8 339.3 414.3 489.3

Fixed Assets 672.6 912.2 1,158.5 1,392.4

Investments 94.0 198.8 298.8 498.8

Other non-Current Assets 25.4 23.0 23.5 24.0

Inventory 189.8 179.3 204.9 236.4

Debtors 350.5 336.0 384.0 443.1

Other Current Assets 59.9 66.6 68.0 69.3

Cash 21.4 8.9 12.6 13.9

Total Current Assets 621.6 590.8 669.4 762.8

Creditors 145.0 138.8 158.6 183.0

Provisions 11.4 12.8 13.1 13.3

Other Current Liabilities 31.8 33.2 33.9 34.5

Total Current Liabilities 188.2 184.8 205.5 230.9

Net Current Assets 433.5 406.1 463.9 531.9

Application of Funds 1,225.5 1,540.1 1,944.7 2,447.1


Key ratios

(Year-end March) FY16 FY17 FY18E FY19E

Per share data (|)

Reported EPS 110.0 56.6 57.1 71.0

Cash EPS 75.0 42.0 45.7 56.8

BV per share 295.1 170.2 216.0 272.7

Cash per Share 5.6 1.0 1.4 1.6

Dividend per share 35.0 14.6 11.4 14.2

Operating Ratios (%)

Gross Profit Margins 83.5 75.9 76.3 75.6

EBITDA margins 33.2 34.9 30.3 32.6

PAT Margins 26.8 27.4 24.3 26.2

Inventory days 44.0 35.9 36.1 36.1

Debtor days 81.3 67.3 67.6 67.6

Creditor days 33.6 27.8 27.9 27.9

Asset Turnover 2.3 2.1 1.9 1.8

EBITDA conversion Rate 56.3 80.2 80.3 80.3

Return Ratios (%)

RoE 37.3 33.2 26.5 26.0

RoCE 46.2 41.8 33.1 32.4

RoIC 54.1 57.1 46.5 48.9

Valuation Ratios (x)

P/E 11.1 21.7 21.4 17.3

EV / EBITDA 20.6 16.7 16.8 13.2

EV / Net Sales 6.9 5.8 5.1 4.3

Market Cap / Sales 6.9 5.9 5.2 4.5

Price to Book Value 4.2 7.2 5.7 4.5

Solvency Ratios

Debt / EBITDA 0.1 0.0 0.0 0.0

Debt / Equity 0.1 0.0 0.0 0.0

Current Ratio 3.2 3.1 3.2 3.2

Quick Ratio 2.2 2.2 2.2 2.2



ICICIdirect.com coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| Cr) FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E

Ajanta Pharma AJAPHA 1211 1,420 Buy 10655.8 110.0 56.6 57.1 71.0 11.0 21.4 21.2 17.1 46.2 41.8 33.1 32.4 37.3 33.2 26.5 26.0

Alembic Pharma ALEMPHA 524 570 Hold 9881.1 38.2 21.2 19.1 28.6 13.7 24.7 27.4 18.3 52.2 25.3 18.7 23.9 45.1 21.0 16.5 20.8

Apollo Hospitals APOHOS 1210 1,400 Buy 16836.2 13.2 12.8 16.5 33.3 91.7 94.3 73.2 36.3 6.6 6.0 6.7 10.8 5.3 4.9 5.9 10.9

Aurobindo Pharma AURPHA 685 755 Hold 40147.6 33.9 38.8 47.0 41.8 20.2 17.7 14.6 16.4 23.1 24.4 25.6 19.7 27.2 24.2 23.0 17.2

Biocon BIOCON 331 380 Hold 19866.0 7.7 11.0 7.8 13.5 42.9 30.2 42.6 24.6 9.3 11.9 10.1 15.9 11.5 13.6 9.0 13.9

Cadila Healthcare CADHEA 466 420 Hold 47721.8 15.0 14.5 15.4 20.5 31.2 32.1 30.2 22.7 24.9 13.1 15.2 18.5 34.4 21.4 19.4 21.6

Cipla CIPLA 548 470 Hold 44112.2 18.5 12.9 17.8 25.3 29.6 42.6 30.7 21.7 12.0 8.0 11.0 14.5 12.5 8.1 10.4 13.1

Divi's Lab DIVLAB 626 665 Hold 16621.0 41.5 39.3 34.6 41.5 15.1 15.9 18.1 15.1 30.5 25.0 20.3 21.5 25.7 19.5 15.4 16.4

Dr Reddy's Labs DRREDD 1949 2,400 Hold 32305.0 141.4 70.6 72.4 126.2 13.8 27.6 26.9 15.4 15.3 6.1 6.8 11.9 19.2 9.5 9.0 13.9

Glenmark Pharma GLEPHA 613 730 Hold 17289.9 32.2 46.0 38.7 40.6 19.0 13.3 15.8 15.1 16.2 18.9 15.9 15.5 21.2 25.5 17.9 15.9

Indoco Remedies INDREM 193 180 Hold 1776.7 9.4 8.4 7.3 14.9 20.5 23.1 26.5 12.9 12.9 8.4 6.8 12.0 14.8 12.0 9.6 17.1

Ipca Laboratories IPCLAB 420 525 Hold 5297.3 7.4 15.4 17.6 27.9 56.9 27.2 23.8 15.0 4.5 8.7 9.3 13.2 4.1 7.9 8.4 12.0

Jubilant Life JUBLIF 643 845 Buy 10236.2 26.0 36.1 44.3 59.1 24.7 17.8 14.5 10.9 12.0 13.3 14.8 17.6 14.2 16.8 17.3 19.0

Lupin LUPIN 937 1,070 Hold 42315.2 50.4 56.6 41.4 53.4 18.6 16.5 22.6 17.5 17.8 16.6 12.4 15.5 20.3 18.9 12.4 14.2

Natco Pharma NATPHA 697 955 Hold 12143.2 9.0 27.0 25.5 16.0 77.0 25.8 27.3 43.5 16.0 33.0 27.6 16.2 12.2 28.8 22.6 12.8

Sun Pharma SUNPHA 461 550 Hold 110557.3 23.4 29.0 20.3 25.5 19.7 15.9 22.7 18.1 18.6 19.8 13.5 15.0 18.0 19.0 12.0 13.4

Syngene Int. SYNINT 439 490 Hold 8789.0 11.1 14.3 14.3 17.4 43.6 33.6 33.6 27.7 14.1 16.8 16.2 17.8 21.6 20.3 17.2 17.4

Torrent Pharma TORPHA 1229 1,250 Hold 20795.0 110.9 55.2 48.3 65.8 11.1 22.3 25.4 18.7 46.5 18.9 17.6 20.7 53.7 21.5 16.5 19.2

Unichem Lab UNILAB 245 235 Hold 2227.1 12.3 12.0 17.3 23.6 19.9 20.4 14.2 10.4 13.8 11.8 11.6 13.9 11.7 10.2 13.1 15.5

RoE (%)EPS (|) PE(x) RoCE (%)



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Documents

Ajanta Pharmaceuticals (AJAPHA) | 1211content.icicidirect.com/mailimages/IDirect_AjantaPharma_Q1FY18.pdf · Ajanta Pharma has five subsidiaries including one step down subsidiary